factors contributing to increased globalisation

Question 1

reasons for moving to international business

Answer 1

• Ansoff’s Matrix – Market development (existing product, new market)
• Expansion strategy (Product Life Cycle)
• Revenue, profit
• Economies of scale

Question 2

REDUCTION OF INTERNATIONAL TRADE BARRIERS/TRADE LIBERALISATION
and what does trade liberalisation bring?

Answer 2

• removing/reducing trade barriers to enable free trade between countries E.g. removal of tariffs, quotas and non-tariff barriers
• Enables businesses to sell in other countries on an even level with domestic businesses
• trade liberalisation brings:
  More exports, Higher GDP, job creation, Higher real wages

Question 3

World trade organisation

Answer 3

• Supports trade liberalisation = reduce trade barriers
  – negotiator and mediator
• E.g. reduce the level of common tariffs applied by trading blocs
• Enforces trade rules and manages disputes between countries
• Power to make judgements against countries
• Most Favoured Nation clause – if you have a rule for one member, it should be in place for all members

Question 4

REDUCED COST OF TRANSPORT AND COMMUNICATION

Answer 4

• Communications – mobile/satellite technology, video calling, internet = rapid spread of information and knowledge
• Ability to outsource work to cheaper workers through effective communication
• Transport – goods move faster and less expensive around the globe
• Containerisation = Uniform boxes= Easier to move in ports / transport – faster, more efficient = doubling the size more than doubles the carrying capacity

Question 5

other factors that contribute to increased globalisation

Answer 5

• structural change
  growth of the global labour force
• migration
• increased investment flows FDI
• the increased significance of global companies

Question 6

pros of increased globalisation

Answer 6

• Employment = greater wealth and consumerism (increased demand)
• Increased profit for firms – leads to greater innovation
• Wider market to sell to – spreads risk across markets
• Economies of Scale/Efficiency = lower prices
• Sharing of knowledge across businesses – structural development (infrastructure)
• Effective use of resources and specialisation – outsourcing opportunities

Question 7

cons of increased globalisation

Answer 7

• Risk – lack of market knowledge
• Costs of setting up abroad / tariffs/standards to meet
• Increased competition leads to lower prices/revenues
• Loss of workers to different countries